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Interest Rates Are Top Concern for Multifamily Professionals, Capital One Survey Finds

BETHESDA, MD. — Concern over potential interest rate hikes is tempering optimism in the multifamily market, according to a recent survey conducted by Capital One Multifamily Finance. Capital One conducted the survey during the NMHC 2017 conference in San Diego in late January. The survey gauges emerging trends and industry insights from multifamily real estate professionals across the country.

About 51 percent of multifamily professionals consider rising interest rates to be their biggest challenge in 2017, more than double the 25 percent of respondents who cited rising costs as their greatest concern. Only 5 percent of those surveyed anticipate potential regulation to be their biggest challenge this year. (Percentages are based on 95 responses.)

These interest rate concerns may signal the end of the current cycle for the multifamily market as 50 percent of those surveyed believe the market has entered the last few legs of the race, while only 7 percent feel the cycle is in its early stages.

Despite market sentiment, significantly more respondents anticipate being buyers than sellers in 2017; 51 percent said that they anticipate being buyers, while 23 percent anticipate being sellers.

“While more industry professionals expect to be buyers than sellers in 2017, increasing interest rates are a concern,” said Grace Huebscher, president of Capital One Multifamily Finance. “In general, this year’s results seem more disparate than in the past, which could be a sign that, though cautiously optimistic, the market itself is not sure where things are heading.”

Both market demand and strong economic conditions are expected to drive both buyers and sellers in 2017. In fact, 30 percent of those surveyed believe market demand will be the biggest driver for buyers this year, and 28 percent said the same for sellers. Similarly, 28 percent of respondents said strong economic conditions will be the biggest driver for buyers in 2017, while 27 percent said the same for sellers.

“Despite the headwinds of supply and demand concerns in certain markets and the possibility of rising interest rates, we are cautiously optimistic, much like our clients,” said Jeff Lee, executive vice president of Capital One Multifamily Finance. “Each year the multifamily industry faces new challenges while uncovering fresh opportunities, and our NMHC survey results demonstrate that this year is no different.”